Financial Reporting

Question 1

What is the purpose of the financial reporting on projects?

Answer 1

To inform the client of the likely outturn costs of the project.

Question 2

What does a financial report include?

Answer 2

All costs incurred to date

The forecast costs to be incurred

Risk allowances

Any variance against the budget amount.

Question 3

What are typical headings for cost reports?

Answer 3

Construction costs
Professional fees
Land costs
Finance costs
Legal fees

Question 4

Why might the outturn cost need to be adjusted during the contract period?

Answer 4

Fixed costs will remain the same however, there may be changes due to

• Variable costs such as provisional sums or provisional quantities
• Variations including contract instructions, anticipated instructions, loss and expense, fluctuations, risk allowances.

Question 5

What does a cash flow forecast for a company analyse?

Answer 5

The predicted incoming and outgoing cash for a business for a set period of time.

Question 6

What does a cash flow forecast for a project analyse?

Answer 6

Typically show the cash flow from the employer to the contractor and consultants.

Question 7

How can cash flows be used for progress monitoring?

Answer 7

The cash flow provided by the contractor at the point of entering into contract is compared to the actual cash flow during the project.

Question 8

How would you produce a cash flow if the contractor has not yet been appointed and a programme has not been agreed?

Answer 8

You could use an S-curve ascertain using a formula which represents the typical progress of a construction project with lower periodic expenditure at the beginning due to site set u an enabling works, and a lower level of expenditure at the end of a project due to the vat majority of materials being on site and a reduced number of trades on site.

Question 9

What is a defined provisional sum?

Answer 9

Those items which have been described in sufficient detail that the contractor is expected to have made allowance for them in their programming, planning and pricing preliminaries. This places the risk on the contractor.

Undefined provisional sum are less well described and so the contractor cannot be expected to make allowance for them in their programming, planning and pricing of preliminaries. These mean that the contractor may be entitled to an extension of time. The client therefore bears the price and scheduling risk.

Question 10

When parties cannot agree on the value of variation within the contract what should happen?

Answer 10

The CA shall value these works on a fair and reasonable basis.